Parkson Retail Group has entered into an agreement with state-owned Qingdao Haiming City Development Company Limited for the sale of its properties located in Qingdao City, Shandong Province, for a consideration price of RMB280 million.
Upon the disposal, Parkson is expected to record an unaudited gain of approximately RMB1.8 million which is calculated based on the consideration of RMB280 million less the aggregate of the carrying amount of the Properties of approximately RMB264.9 million as at 31 August 2022 and the relevant tax.
The net proceeds from the Disposal after deducting the relevant expenses and value-added tax are estimated to be approximately RMB265.8 million. Having considered the financial performance of the Group and in particular, the continuous global impact of the COVID-19 pandemic on the operating environment as well as the liquidity of the Group for its working
capital, the Company intends to use the net proceeds from the Disposal as general working capital of the Group.
Parkson currently uses the properties for the operation of a department store and office space rental. It said the facilities of the properties have been in use for more than 20 years since their commencement of operation in 1997. To ensure the continuous operation and improvement of the competitiveness of the department store, it needs to be renovated as a whole and therefore, requires a large amount of investment from the Group. Adding the properties being located in an old town area that is subject to an urban reconstruction of Qingdao City, the residents of the district have gradually moved out from the old town to the suburban area.
As a result, the spending power of the local residents has weakened and the department store has continued to suffer losses since 2015. In addition, since the outbreak of COVID-19, in order to control the epidemic in China, the state has adopted a number of policies such as shutting down production and home quarantine, which have had a huge impact on retailed business including department stores
